Case Digest: Rehabilitation Finance Corporation vs Court of Appeals, et.al., 94 Phil 985, G.R. No. L-5942

Rehabilitation Finance Corporation vs Court of Appeals, et.al., 94 Phil 985, G.R. No. L-5942, May 14, 1954

Subject: Obligations and Contracts

FACTS

Jesus Anduiza and Quitana Cano borrowes money from the Agricultural and Industrial Bank (now RFC), evidenced by a promissory note dated October 31, 1941. They promised to pay Php13,800.00 on or before October 31, 1951 with interest at a rate of 6% per annum. Payment is to be made in ten equal annual installments.

Anduiza and Cano failed to pay the yearly amortization which fell due on October 1942 and 1943. Upon learning this, Estelito Madrid paid on October 30, 1944 Php16,425.17 which is the full amount of indebtedness to RFC.

Thereafter Madrid instituted an action asking the court to declare as paid the Php16,425.17 which Anduiza and Cano owed RFC and order them to cancel the mortgage and order Anduiza and Cano to pay Madrid the Php16,425.17 with legal interest.

RFC alleged that the loan of Php13,800.00 had not become due and demandable at the time payment was made and that it accepted the payment as deposit pending proof of existence of Anduiza’s authority and approval. Anduiza also argued that the payment made by Madrid was without his knowledge and consent, thus the payment made was null and void.

RTC dismissed the complaint. On appeal, the CA reversed the decision and directed RFC to cancel the mortgage and ordered Anduiza to pay Madrid Php16,425.17; hence this appeal on certiorari.

ISSUE

Whether or not the payment made by Madrid was valid.

RULING

Yes, the payment by Madrid was valid.

Under the law (Art 1158, NCC of Spain which was, in force in the Philippines), when the payments under consideration were made, "payment may be made by any person, whether he has an interest in the performance of the obligation or not, and whether the payment is known and approved by the debtor or whether he is unaware of it.

The effects of payment must be determined at the time it was made and the rights acquired by the payor should not be dependent upon, or subject to modification by, subsequent unilateral acts or omissions of the debtor. The question whether the payments were beneficial or not to the debtor, depends upon the law, not upon his will. The Bank, as creditor, had no other right than to exact payment, after which the obligation in question, as regards said creditor, and, hence, the latter's status and rights as such, become automatically extinguished.